Currency Ban: New & used car retail to fall by over 30% in November

The used car sales have been hit badly. According to industry experts the sales are expected to go down by 50%, which may result into a revenue loss of about Rs 3,900 crore.Nabeel A Khan | ETAuto | Updated: June 08, 2017, 12:27 IST

Currency Ban: New & used car retail to fall by over 30% in NovemberNEW DELHI: Situation at passenger vehicle dealerships worsens further as footfall across India has slowed down by 75 percent and bookings has come down equally by about 50 percent, Federation of Automobile Dealers Association (FADA) told ETAuto.

The apex body representing automobile dealers fear that November retail sales for passenger vehicles will be affected by 30 percent while the numbers will further go down in December if things don’t improve.

“The situation is even worst at the service centers because of the lack of cash at the counter. However, many a time the reason is not lack of cash at buyers end but they (buyers) are either busy with other things that has crop up after currency ban or they are keeping the cash at hand for more important urgent things,” says John K Paul, president FADA.

The overhead cost is very high at the automobile dealerships. Specially, the dealerships in the interior regions are seeing more impact and the situation is going bad for brands that has more acceptance in the rural markets.

“Rural people are not so comfortable with banking system and they believe in keeping cash at home, the situation has really created a havoc for them which has an adverse impact,” says a top official of an auto firm, without disclosing his identity.

The auto dealers are writing to the manufacturer to reduce the dispatches looking at the situation. “We have seen a significant drop in inquiries and bookings in the last two weeks. The situation is getting bad day by day,” says Nikunj Sanghi, Managing Director, J S Fourwheels.

According to FADA, the situation in northern part of the country is worst than down south, especially Kerala that has a fair amount of cash flow from gulf countries.

The overhead cost is very high at the dealerships. Specially, the dealerships in the interior regions are seeing more impact and the situation is going bad for brands that has more acceptance in the rural markets.

The carmakers are also staying in solidarity to the dealers. Rakesh Srivastava, Senior Vice President (Sales & Marketing), Hyundai Motor India said “We are conscious of the challenges faced by the channel partner and are supporting them.”

Used CarsThe used passenger car sales have been hit even badly. According to industry experts the sales are expected to go down by 50 percent, which may result into a revenue loss of about Rs 3,900 crore. The bigger impact is seen in the unorganised used car market, which is mostly driven by cash flow.

“There has been enough inquiries but the problem is that mostly of them want to pay in old cash which has been nullified by the government and we cannot accept Rs 500 or Rs 1,000 notes so it is finally resulting in no sales,” says Ravi Prakash who sell used cars in South Delhi.

Used car sales in the organised space has also been hit badly. “Though, the impact is temporary but huge. We expect 30 percent drop in sales at organised place while in unorganised place it will go down by over 65 percent," says Nagendra Palle, CEO, Mahindra First Choice.

He further elaborates that total used PV sales market stands at around 2.6 lakh units and overall 50 percent fall in sales is expected.

“Average deal size in used cars space is Rs 3 lakh. So, 3 lakh multiplied by 2.6 lakh comes about Rs 7,800 crore and 50 percent of this would be around Rs 3,900 crore. So we expect a loss of this magnitude,” he explained.

Experts feel that there is demand but the buying has been delayed due to lack of funds.

Prices of most SUVs were cut between Rs 1.1 lakh and Rs 3 lakh following the implementation of GST, which subsumed over a dozen central and state levies like excise duty, service tax, and VAT from July 1.